Wages growth 'soft like fairy floss', ignore bad-for-you spin

Don't believe what you've heard. Wages are barely climbing. The Bureau of Statistics compiles the only reliable measure, and it came out on Wednesday.

In the year to December31, the bureau's wage price index climbed 2.6 per cent. That's less than inflation - which is 2.7 per cent.

It's the lowest outcome this century, and also the lowest on record because the records only go back to the late 1990s. Throughout most of this century wages have been growing at more than 3.5 per cent. For four years from 2005 they grew at more than 4 per cent.

The Australian Chamber of Commerce and Industry describes the latest result of 2.6 per cent as “stagnant”. The Bank of Melbourne says it’s “soft like fairy floss”.

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It's soft because employment is soft. Wage growth always slows when employment growth slows, and it ramps up when the jobs market ramps up. Australia has had next to no employment growth in the past year (the rounded growth rate published by the ABS is 0.0 per cent). The unemployment rate has crept up from 5.1 to 6 per cent.

Private sector wages climbed just 2.5 per cent, yet our leaders would have us believe it's this historically low growth rate that has pushed Holden, Toyota, Alcoa, SPC and Qantas to the edge.

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A few years back manufacturing wages were climbing at 4 per cent. It's reasonable to ask why the present much lower growth rate (2.8 per cent) should be causing problems now when the higher rate of 4 per cent was not? Mining wages are climbing 3 per cent - two years ago they were climbing 4.6 per cent. Construction wages are climbing 2.9 per cent (two years ago they were up 4.3 per cent).

Wages in the public sector are climbing 2.7 per cent. For every year this past decade they have climbed by more than 3 per cent and at times more than 4 per cent.

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The new lower rate of wage growth is extraordinarily good news for those who had been concerned about a wage-price spiral. The lower dollar was pushing up the price of imports. If that had fed through into higher wages, which had themselves fed through into higher prices, the Reserve Bank would have been concerned.

Exporters would have been worried as well. Accelerating wage growth would have made them less competitive at the same time the dollar was making them more competitive. But it's not. Talk about wages hitting economic growth is political. It's just not happening.